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Financial Services

Final Rule Affects Bank Holding Companies

In October, the Federal Reserve System’s Board of Governors has approved a final rule that amends certain parts of the current capital plan and stress test rules for various banking companies. Approved in October, the capital plan rule allows the Federal Reserve to review the internal capital planning procedure of a large bank holding company (BHC) with total consolidated assets of $50 billion or more, and its ability to uphold satisfactory capital to operate under anticipated and stressful conditions. The stress test rules also require large BHCs to perform yearly and mid-cycle company-run stress tests. Further, under the Comprehensive Capital. Read More.

FASB Discusses Impairment Model Project

At its meeting two weeks ago, the Financial Accounting Standards Board (“FASB”) discussed one of unresolved issues from Proposed Accounting Standards Update No. 2013-220, Financial Instruments—Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. The issue in question was the requirement for recording equity method investments. Per the proposal, equity method investments would go through a one-step test before being marked down. However, the approach was questioned in comment letters, and FASB has contemplated whether to drop the provision or create an alternative approach. Another issue covered in the meeting was the project to streamline income tax. Read More.

Federal Banking Agencies Release Two Final Rules

Adopted by the Federal Reserve Board, Federal Deposit Insurance Corporation (“FDIC”) and Office of the Comptroller of the Currency (“OCC”), two recently issued final rules will strengthen the liquidity positions of large financial institutions, improve the liquidity risk profile of international banking organizations, and enhance the measurement and management of liquidity risk. Issued on September 3rd, the final liquidity coverage ratio rule (LCR) implements a quantitative liquidity requirement consistent with the LCR established by the Basel Committee on Banking Supervision and with Section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. For the second final rule, the. Read More.

Write-Down Guidance to Stay in ASC 323-10-35-31

The Financial Accounting Standards Board (“FASB”) has opted to keep the guidance related to write-downs of equity method investments in Accounting Standards Codification (ASC) 323-10-35-31, Investments — Equity Method and Joint Ventures – Overall – Subsequent Measurement in lieu of making the previously proposed amendments to its upcoming Financial Instrument standard. In regard to the guidance, ASC 323-10-35-31 applies the concept of a decrease in value that is deemed “other than temporary” for writing down equity investments believed at their historical rate. Although the write-down guidance remains intact, the issue has been met with disapproval by FASB members. Thomas Linsmeier. Read More.

U.S. Banks Still Using Poor Risk Models

After examining the 30 biggest U.S. financial institutions for its annual stress tests, the Federal Reserve is reporting that banks continue to rely on weak risk models. Announcing publicly last week their concerns on this year’s tests, it was discovered during the stress test were assumptions that were poorly documented or supported, had select validation checks, and notions made without knowing if they were possible. The Federal Reserve’s findings mirror an ongoing concern over banks’ reporting efforts. In January, global regulators encouraged the Financial Stability Board to make improved reporting a top priority. Additionally, Federal Reserve governor Daniel Tarullo has. Read More.

SEC Risk Alert and FAQs to Assist with Customer Sales of Securities

Serving as guidance for broker-dealers when involved with unregistered transactions on their customers’ behalf, the Securities and Exchange Commission (“SEC”) has issued a Risk Alert and accompanying FAQs. The Risk Alert discusses deficiencies identified by the SEC’s Office of Compliance Inspections and Examinations during its review of 22 broker-dealers that engage in microcap securities sales. In addition, the Risk Alert is supplemented with FAQs regarding customer sales of securities. Published by the SEC Division of Trading and Markets, the FAQs remind broker-dealers the requirements for abiding by the exemption. For the Risk Alert news release , visit the SEC website. Also be. Read More.

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